Vegetable oil prices saw a large rebound in July, and will fall from peaks later

Vegetable oil prices saw a large rebound in July. The growth in rapeseed oil prices exceeded 9%, and the price of imported four-grade rapeseed oil was up to 9,000yuan/ton, the highest level in recent years. Prices of soybean oil and palm oil both saw a growth of about 5%, but the factors causing growths were different from each other. 
 
The rise of rapeseed oil prices was mainly because of tight global supply, low production in China, increased import difficulty, and low stocks of companies, while the growth in palm oil prices was mainly affected by the speculation in main producing countries and lower stocks in domestic ports, which have dropped to the lowest level since October 2017. The increase in rapeseed oil and palm oil prices drove up the price of soybean oil.
 
From the perspective of supply and demand, vegetable oil prices will decline later, and soybean oil prices are likely to decrease firstly for following reasons.
 
Firstly, the import volume and stocks of soybeans are larger. China’s import volume of soybeans in June was up to 11.16 million tons, the highest level in record, and the quantity of soybeans arriving at ports in July and August is still huge. The current stock of soybeans in ports has reached a record high of 7.5 million tons. China’s imports of soybeans from South America were impacted by the COVID-19 pandemic, but the peak season of exporting soybeans in South America has passed. Chinese companies will gradually turn to importing American soybeans, whose expected production remain high, so the supply of soybeans and its products is sufficient.   
 
Secondly, final consumption recovered slowly. Vegetable oil consumed in catering contributes to about 40% of China’s total consumption, with soybean oil taking a main part. However, affected by the COVID-19 epidemic, the operation performance of catering now is much worse than that of previous years, the recovery rate of soybean oil demand is far below the growth rate of supply.
 
So, soybean oil prices are very likely to drop later. Recently, soybean oil has been used to replace rapeseed oil in some cases. If soybean oil prices decline, it will restrain the growth of rapeseed oil prices and even bring the overall price of vegetable oil down.